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Beyond Lean

RFID: A Story of Lemons and Lemonade

By Rick Korchak, RFID Practice Area Coordinator, National Institute of Standards and Technology, Manufacturing Extension Partnership

Next time you’re in a supermarket or a department store, try to find an item on the shelves that doesn’t have a bar code printed on the label. Bar codes are everywhere – they’ve become an integral part of our lives and a good example of a relatively new technology that is now so widely used that it’s taken completely for granted.

Bar coding was first used in retail on June 26, 1974, when a pack of Wrigley’s Juicy Fruit chewing gum rolled down the conveyer belt and flashed under the scanner at Marsh’s Supermarket in Troy, Ohio. If you are more than 30 years old, you probably remember grocery store checkout lines before bar codes and scanners. Every item was manually priced and the cashier had to enter the numbers on a cash register keyboard – and make change without computer assistance – how quaint! Mistakes were frequent and a trip through the checkout line felt like it took an eternity.

Bar coding changed all that, but not without controversy. It was a new technology: it was expensive to implement, retailers and consumers didn’t like it, it took many years to become ubiquitous, and very few thought it would amount to anything.

Fast forward to 2005, and this tale is replaying itself with another technology from the same family tree. RFID, or Radio Frequency Identification, is rapidly becoming the buzzword of the 21 st Century’s first decade. It will affect us all and it seems destined to have benefits – and consequences – far beyond bar coding.

RFID Mandates
Several very large organizations, including Wal-Mart, Target, the Department of Defense, and others have begun to implement RFID technology to identify and track items throughout their extended enterprise. They are starting to require the use of RFID by their suppliers, and these mandates will eventually affect every organization in the supply chain, right down to the smallest manufacturer, distributor, and retailer.

When will this happen? Wal-Mart wanted its top 100 suppliers to be RFID compliant by the end of the first quarter of 2005, and they expect the rest of their suppliers to be using RFID within the next 2-3 years. The Department of Defense also expects all of their approximately 45,000 suppliers to become RFID compliant over the next several years, as witnessed by their fiscal year 2005 contracts with suppliers.

And it won’t stop there – large original equipment manufacturers (OEMs) in the aerospace, automotive, food, and other industries have also started implementing RFID technology. Within the next few years, RFID compliance will be expected by virtually every supplier in every industry sector.

Prepare Now for RFID
So what is RFID, what will it mean to your business and what should you do to prepare? To paraphrase an old Chinese proverb, every journey begins with the first step. In this case, the first step is learning as much as possible about the technology and its implications. This knowledge will help you to develop a business strategy and, if necessary, an RFID implementation plan that will eventually – and hopefully – improve the bottom line.

It won’t be easy and it won’t happen overnight. This article won’t make you an RFID expert, but it can help start you on the road to understanding RFID technology and the implications for your business.

Oldest New Technology
RFID has been called “the oldest new technology in the world”, but even though it’s been receiving a lot of press recently, RFID was actually first developed in the 1940s. During World War II, the British used a crude RFID system for their “Identification Friend or Foe” (IFF) systems in Royal Air Force bombers.

The recent interest in RFID has come primarily from large manufacturers and others who are continually looking for technologies that can improve their productivity. The ultimate (and theoretical) goal is to reduce inventory to a point where a single item is delivered to the shelf just as the customer reaches for it. This means that the ability to track and control inventory is a key factor in reducing overhead, shipping expenses, stocking fees, and “shrinkage” due to loss, theft, or damage.

Next Generation Bar Coding
Although bar coding has been used for the last 30 years or so to identify and track products from the manufacturer to the consumer, bar codes aren’t providing enough information to make crucial real-time decisions in today’s fast-paced marketplace. Bar codes were designed to convey only a small amount of information, and a big disadvantage of bar coding is that each label must be held directly under a scanner to obtain a successful read.

RFID can be thought of as the next-generation of bar coding. It can generally be defined as a non-contact technology that can automatically capture data. RFID can be used to remotely identify, track, and communicate item and product information.

For example, if the local retail store receives a pallet with a variety of consumer products all packaged in different cases, each box and every item in the boxes must be individually scanned with a bar code system. An RFID system could allow the entire pallet and all its contents to be read as it passes by an antenna and reader, and each item can be identified and entered into the store’s inventory without human intervention.

As RFID technology matures, more applications are becoming apparent. For example, the technology is currently being used in “smart” cards and security badges, and to record and transmit information on temperature, humidity, altitude, and pressure. If you’ve ever used a FasTrak, I-Pass, or EZ Pass in a highway toll booth, you’ve already experienced one of the benefits of RFID.

The Components of RFID
RFID, as it currently exists, consists of three basic components: RFID tags; RFID readers (including the antenna array); and software.

RFID tags are small devices that contain a processor and an antenna. The processor, or computer “chip”, can be programmed with information about a product or with a number that corresponds to information that is stored in a database. The tags are placed on or in the item to be tracked, and the information they contain can be accessed with an RFID reader.

There are three types of RFID tags: passive, active, or semi-active. Passive tags are usually very small, have a limited amount of memory capacity and do not have a built-in power source. They are powered by the electromagnetic radiation from the RFID antenna. Passive tags can only be read from short distances of about one meter. They also have a very long life span unless they are damaged or torn. Passive tags are the most common form of RFID tag and are used in many different retail items. They are sometimes found on small items or within layers of cardboard in a carton. Passive tags currently cost between $0.50 and $1.50.

Active tags are powered by an internal battery and transmit data when triggered by a reader. They are usually larger in size than passive tags, and while active tags can be read from distances up to 10 or more meters, they are somewhat limited by the life span of the battery. An active tag is always powered up, ready to transmit. An example of an active tag is the EZ Pass, used in automobiles for automatic payment of toll charges.

Semi-active tags are similar to their active counterpart, but the battery only powers up the tag when it receives a signal from the reader and antenna. A semi-active tag has a longer life expectancy than an active tag because its battery is not in continuous use.

RFID tags can hold much more information than a bar code. Also, the information written to a tag can be erased or modified and the tag can be used multiple times.

RFID Tag Comparison

Active

Passive

Advantages

Disadvantages

Advantages

Disadvantages

Longer distance read capability

Larger size

Smaller size

Short read ranges

Self-activated in by reader/ antenna

Limited battery life

Longer life expectancy

Requires higher-powered reader

Write/re-write capability

Higher cost

Lower cost

Mostly read-only

An RFID reader is a device that can translate the information on the RFID tag into a data collection system, a computer display, or a database. The information is usually sent to the company’s information system, Enterprise Resource Planning (ERP) system, or elsewhere via middleware, which is software that helps make the information usable for other applications.

RFID is Here To Stay
Although most of the current discussion about RFID is focused on tags and readers, they’re really only a small part of the overall RFID picture. Technology is a tool, and RFID hardware and software are no exception. When planning for an RFID system, most of the effort will be spent on considering how the RFID system will affect the many interdependent business processes within the company, and in developing an overall business strategy that will exploit RFID in the best interests of the organization.

The rapid evolution of RFID has led to many claims and speculation about the benefits of the technology and its application. Each new market study seems to proclaim greater and greater benefits. For example, three recent studies by the International Data Corporation (IDC), In-Stat (a market research firm), and the Wireless Data Research Group claim that the market for RFID will be $2 billion, $2.8 billion, or $4.2 billion within 3 years. Without a crystal ball, it’s very hard to tell, but one thing’s for certain: this technology will be with us for a long time to come.

Although the potential exists for RFID to deliver benefits, many challenges must be surmounted in order for the technology to mature and realize its full potential. The technology still has a long way to go before it matures. In fact, the market is demanding results while many questions remain unanswered. Issues like standards for RFID tags and readers, standards for the data that will be written to the tags, wireless frequency and spectrum issues and privacy and security concerns are still evolving.

RFID & the Small Manufacturer
What does this all mean for the small manufacturer? You many already be experiencing pressure from your customers to implement some form of RFID. At the most basic level, an RFID system can consist of the so-called “slap and ship” approach. Slap and ship generally refers to the most basic application of RFID, with no integration into an accounting or Enterprise Resource Planning (ERP) system. In some instances, RFID can be implemented by placing an RFID tag on an item and using the customer’s web-based data entry system to provide the tag’s serial number, along with the item description or other pertinent information as required by the customer. Some organizations, such as the Department of Defense, currently have provisions for this type of approach.

But while this may be a quick and relatively inexpensive solution, the real value will be in figuring out how to turn an RFID implementation from a cost center to a profit center for your company. This is especially important for smaller manufacturers, who may be required to implement some form of RFID from one or more customers, but who may not require an RFID system for their own internal use.

It’s interesting to note that even the most optimistic RFID analysts are currently saying that the return on investment, at least at this point in time, just isn’t apparent. Everyone seems interested in implementing RFID throughout their supply chains because it will cut billions of dollars in costs, but who will pay for the RFID systems is still undetermined.

Start Now
That’s the lemons, what about the lemonade?

RFID is coming, so it’s important to start learning about it, to start thinking about how it will affect your business, and to get the help required to revise your business operations and strategy to exploit this technology so that it can become a profit center.

One of the best ways to do this is to contact your local Manufacturing Extension Partnership (MEP) Center to conduct a Lean Manufacturing exercise called Value Stream Mapping in your organization. This is a process that traces the flow of a customer’s order from start to finish and determines where the elimination of inefficient processes can save time, effort and costs. It can help you to discover which bottlenecks in your plant need to be addressed; some of the constraints in your business process might be resolved by applying RFID technology.

Some of the benefits of RFID that might be applicable in your business include:

  • Improving the Supply Chain: OEMs are interested in RFID because it can help make the information that flows through the supply chain more efficient. But every manufacturer is both a supplier and a customer. Could your company benefit by working with your suppliers to implement RFID in your supply chain?
  • Tracking Assets and Equipment: Retailers are using RFID to locate items to prevent stock-outs and to track inventory and shipping containers such as pallets or bins. Your company may be able to use the technology for tracking internal assets such as computers, expensive tooling, work-in-process, or shipments to your customers.
  • Shipping and Receiving: As long as you’re being required to install an RFID system, you can increase the benefits by using the system to track incoming purchases. Perhaps you can offer an advanced order tracking information system to your customers as a way to distinguish your company from the competition.
  • Quality: RFID tags can include a temperature, shock, or pressure sensor that can help determine whether a product was kept in the right temperature range or received a strong impact. This could be appropriate for delicate electronic instruments, food products, or overseas shipments.
  • Counterfeiting and Inventory Shrinkage: RFID can be used for lifecycle identification of important or expensive products, and can help prevent counterfeit examples from being distributed for sale. This is especially important in the pharmaceutical and jewelry industries.
Find Out More
Your company will probably be affected by RFID as the mandates start to make their way through their respective supply chains. The best way to prepare is to learn as much as you can about this technology and how it might affect your business. A good place to start is by attending seminars, workshops, and free online events that cover RFID basics. Talk to your local Manufacturing Extension Partnership Center about preparing your company for RFID.

Here is a list of resources where you can start the journey:

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